Following a recent discussion of Chinese payment companies, I wanted to start with a short introduction. Some may have come across the list of Payment Service Providers participating in Amazon's program with the same name:
https://sellercentral.amazon.com/gp/help/help.html?itemID=GHP8M87Z5W6XTSTL
https://sellercentral.amazon.com/se...9e5e482&pageNumber=1&pageSize=48&locale=en-US
Of the 51 on both lists, a whopping 35 are of Chinese origin. With many of them being run by state banks such as CITIC, etc. It is obvious that those companies are part of a bigger ecosystem facilitating global trade of Chinese companies, in this particular case Amazon. It is logically, that there are very limited US companies, as they normally trade in USD and keep USD only. It is also evident that there are a good number of UK-based (Wise, OFX, even WorldFirst was once British) companies as UK retail banks traditionally made good money on FX (up to 3% compared to Germany where 0.1% is definitely possible for retail banks).
International Chinese Trade and Banks
Back in the old days, before China joined the WTO, it was not possible to export goods from China with a Chinese compmany. One had to use at least a Hong Kong company (still British at the time) that then set up a Chinese WOFE. HSBC was then the preferred banking partner in Hong Kong. Moving goods in and out of China was then possible, although still with a lot of documents.
Once China jouned the WTO, direct exports became easier and possible. But banking was still troubles some. Hence many kept bank accounts in Hong Kong for faster USD processing. Even today, many companies use bank account in Hong Kong, many times with separate entities in Hong Kong or BVI. Things are just a bit easier to handle.
Inside China
The situation inside China is sometimes hard to describe. But most SME rarely pay any tax. The vast majority on taobao.com is sold from private account like people did this on eBay in Europe or the US for some time back in the days. If you buy stuff from Chinese companies, more often than not, they will give you personal accounts to pay the money to. Nothing is taxes. Even withdrawals from corporate accounts to personal accounts is largely possible without any tax involvement.
Many of us, including late @jafo, normally found it easier to instruct Chinese residents to make CNY payments inside China to pay their suppliers and pay them back elsewhere. Especially these days, there are many rich Chinese looking to move out up to hundreds of millions of USD equivalents out of China due to the fear of declining exchange rates in future. And it is not uncommon for Chinese to take the maximum allowed 20k CNY in cash out of China on their trips to Hong Kong (where they can be deposited as convertible CNH in any bank). You hence are often very welcome if you offer offshore money.
Currency Control
Each resident in China is allowed up to 50k USD into China or out of China per year. You can then make the transfer with the bank (in person), normally to a Hong Kong bank. If you want to transfer more, you need to show proof that tax has been paid, have a selling contract of real estate, etc.
Companies that are transacting with banks for transfers across borders, typically have to physically go to their bank and show trade invoices, customs documents, etc. in order to get the transfers approved. As you can imagine, this is a real time waster!
Facilitating Trade
As government and chambers of commerce, etc. are encouraging physical good trade of Chinese companies (both export but also import), there of course is a need to facilitate such transactions. And Amazon normally only pays out in local currency at inflated exchange rates. That's why many banks started offering banking solutions facilitating the transfer of USD from Amazon and suppliers into China. If you are banking with CITIC in China, it is very attractive to have the same bank offering you US bank details through their US branch in order to receive money from Amazon and then get it in China when you need it.
I am also aware of Chinese trading companies getting themselves into the business that was traditionally handled by the Export–Import Bank of China. They now offer a range of financing and trade finance instruments, like demand guarantees, trade financing, etc. and and some have acquired banking licences abroad solely for that purpose.
The Offer
Many of those companies already have banking licences in plenty of jurisdictions in order to offer local collecting bank accounts and payouts accounts in the customer's name. That's why quite a few formerly China-only companies started offering their service also to non-Chinese companies (and individuals).
From my experience, most of these payment companies have typical FX rates of about 1% with the option to negotiate down to like 0.15% for the main currency pairs for volumes (normally no less than 100k USD per year, typically more). Their core business is trade with physical goods. That's the typical customer base they are looking for. Many are open to service companies as well, but the more exotic it get's the harder it is to open your account.
https://sellercentral.amazon.com/gp/help/help.html?itemID=GHP8M87Z5W6XTSTL
https://sellercentral.amazon.com/se...9e5e482&pageNumber=1&pageSize=48&locale=en-US
Of the 51 on both lists, a whopping 35 are of Chinese origin. With many of them being run by state banks such as CITIC, etc. It is obvious that those companies are part of a bigger ecosystem facilitating global trade of Chinese companies, in this particular case Amazon. It is logically, that there are very limited US companies, as they normally trade in USD and keep USD only. It is also evident that there are a good number of UK-based (Wise, OFX, even WorldFirst was once British) companies as UK retail banks traditionally made good money on FX (up to 3% compared to Germany where 0.1% is definitely possible for retail banks).
International Chinese Trade and Banks
Back in the old days, before China joined the WTO, it was not possible to export goods from China with a Chinese compmany. One had to use at least a Hong Kong company (still British at the time) that then set up a Chinese WOFE. HSBC was then the preferred banking partner in Hong Kong. Moving goods in and out of China was then possible, although still with a lot of documents.
Once China jouned the WTO, direct exports became easier and possible. But banking was still troubles some. Hence many kept bank accounts in Hong Kong for faster USD processing. Even today, many companies use bank account in Hong Kong, many times with separate entities in Hong Kong or BVI. Things are just a bit easier to handle.
Inside China
The situation inside China is sometimes hard to describe. But most SME rarely pay any tax. The vast majority on taobao.com is sold from private account like people did this on eBay in Europe or the US for some time back in the days. If you buy stuff from Chinese companies, more often than not, they will give you personal accounts to pay the money to. Nothing is taxes. Even withdrawals from corporate accounts to personal accounts is largely possible without any tax involvement.
Many of us, including late @jafo, normally found it easier to instruct Chinese residents to make CNY payments inside China to pay their suppliers and pay them back elsewhere. Especially these days, there are many rich Chinese looking to move out up to hundreds of millions of USD equivalents out of China due to the fear of declining exchange rates in future. And it is not uncommon for Chinese to take the maximum allowed 20k CNY in cash out of China on their trips to Hong Kong (where they can be deposited as convertible CNH in any bank). You hence are often very welcome if you offer offshore money.
Currency Control
Each resident in China is allowed up to 50k USD into China or out of China per year. You can then make the transfer with the bank (in person), normally to a Hong Kong bank. If you want to transfer more, you need to show proof that tax has been paid, have a selling contract of real estate, etc.
Companies that are transacting with banks for transfers across borders, typically have to physically go to their bank and show trade invoices, customs documents, etc. in order to get the transfers approved. As you can imagine, this is a real time waster!
Facilitating Trade
As government and chambers of commerce, etc. are encouraging physical good trade of Chinese companies (both export but also import), there of course is a need to facilitate such transactions. And Amazon normally only pays out in local currency at inflated exchange rates. That's why many banks started offering banking solutions facilitating the transfer of USD from Amazon and suppliers into China. If you are banking with CITIC in China, it is very attractive to have the same bank offering you US bank details through their US branch in order to receive money from Amazon and then get it in China when you need it.
I am also aware of Chinese trading companies getting themselves into the business that was traditionally handled by the Export–Import Bank of China. They now offer a range of financing and trade finance instruments, like demand guarantees, trade financing, etc. and and some have acquired banking licences abroad solely for that purpose.
The Offer
Many of those companies already have banking licences in plenty of jurisdictions in order to offer local collecting bank accounts and payouts accounts in the customer's name. That's why quite a few formerly China-only companies started offering their service also to non-Chinese companies (and individuals).
From my experience, most of these payment companies have typical FX rates of about 1% with the option to negotiate down to like 0.15% for the main currency pairs for volumes (normally no less than 100k USD per year, typically more). Their core business is trade with physical goods. That's the typical customer base they are looking for. Many are open to service companies as well, but the more exotic it get's the harder it is to open your account.
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